Here's 4 of the Most Common Forex Trading Mistakes

Lots of people come into forex trading thinking they are going to make lots of money, however most people actually end up losing money in the long run. So why is this? Well here's four separate examples of some of the most common mistakes these losing traders will make:

1. Trading against the trend.

Many people new to forex trading adopt a share-trading mindset in that they want to buy low and sell high (or vice versa if opening a short position). I did this myself when I first started trading, and while it's true that you can potentially generate some big winners trying to catch the top and bottom of a trend, it's also exceedingly hard to do.

It's much easier to always trade in the same direction as the overall trend because even though your profits may be smaller, at least you have probability on your side. In other words even if you mis-time your entry you may still be saved by the trend continuing to move in your favour.

2. Scalping.

Scalping is another popular way to trade the forex markets. This basically involves taking lots of positions throughout the day with the aim of capturing lots of small profits, often in the region of 3-10 points per trade.

The problem with this method is that not only is it very hard to do, but you also run the risk of your broker canceling your account or making things difficult for you when they find out what you are doing.

3. Using too much leverage.

Another way you can quickly blow your trading capital is to over-leverage yourself. For example the general advice is that you should only risk around 3% of your capital per trade so if you are risking as much as 10% or 20%, for instance, then you are going to lose a large percentage of your capital when you suffer a losing trade. Plus if you have a few losing trades in a row then you are really going to struggle.

4. Using a forex robot.

Forex robots are everywhere at the moment. In fact there's hardly a week goes by without a new forex robot being released onto the market. However the sad reality is that most of these robots will end up losing money in the long run.

The problem they have is that they will often fail to adapt to changing market conditions. Plus as well as that you will often find that a lot of them use very large stop losses whilst only targeting a small number of pips profit, which is obviously a recipe for disaster.

So if you can avoid these four common mistakes, there's no reason why you can't become a highly profitable forex trader.

Forex Time Machine Review
A review of Forex Time Machine, the new trading course from Bill Poulos.